HKIR2015-58 Korea Economy and Industry Overview 4Q15 · 2. Due to the change of System of National Accounts, GDP figures were restated from 2000 (Source) Bank of Korea ("BOK") 3 ＜GDP

A member of MUFG, a global financial group

Korea

Economy and Industry

Overview

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

Corporate Research Division (Hong Kong)

Mar 2016

Korea Economy and Industry Overview | Mar 20161

Table of contents

1．Overview of Korea Economy

2．Korean Economic Indicator and Outlook

3．Trends of Major Industry in Korea

4．Conclusion


1．Overview of Korea Economy


603 651 721 767

876 920 966 1,043 1,104

1,152 1,265

1,333 1,377 1,429 1,485

2.6%

0

2

4

6

8

10

0

300

600

900

1,200

1,500

1,800

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

(KRW trillion) (YoY, %)

Real GDP growth rate (RHS)

Nominal GDP

(Note) 1. Preliminary data was used for 20152. Due to the change of System of National Accounts, GDP figures were restated from 2000

(Source) Bank of Korea ("BOK")

3

＜GDP Growth Trend＞ Annual GDP growth slowed down due to weak export

and softened manufacturing, while recent quarterly GDP improved slightly

� Korea economy, as a mature economy, posted low single-digit growths since 2012.

� In 2015, although real GDP growth remained positive, it slowed down to 2.6% YoY from 3.3% YoY in 2014.

� Slowdown in annual GDP was largely due to weak export and decelerated manufacturing.

Annual GDP Trend ~ Annual GDP growth slowed down

Quarterly GDP Trend ~ The growth rate slightly improved in 4Q15� Quarterly GDP growth in YoY terms maintained to rise modestly in 4Q15 due to improvement in private consumption and construction sectors.

� However, it is too early to determine the growth is on the solid rising trajectory due to lackluster major economic drivers of cautious manufacturing and weak export.

1. Overview of Korea Economy

(at chained 2010 year prices, original series)

4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15

3.5 3.9 3.4 3.3 2.7 2.5 2.2 2.7 3.0Real GDP

Growth (YoY, %)

(Note) 1. Preliminary data was used from 1Q14-3Q15 and advanced estimate data was used for 4Q152. Due to the change of System of National Accounts, restated GDP figures were used

(Source) BOK


-4

-2

0

2

4

6

8

10

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Manufacturing Construction Retail and Food Hospitality

Finance and Insurance Others GDP

(Note) 1. Preliminary data was used from 1Q14-3Q15 and advanced estimate data was used for 4Q152. Others include real estates & leasing, public admin & defense, information and telecommunication, educational service, business service and etc

3. Due to the change of System of National Accounts, restated GDP figures were used(Source) BOK

(YoY, %) (at chained 2010 year prices, original series)

4

�Regarding production activity, manufacturing accounted for 28.6% of total real GDP followed by retail and food hospitality (10.4%) in 4Q15. Besides, finance & insurance and construction accounted for 5.7% and 4.5% respectively.

� In 4Q15, quarterly GDP growth trend in YoY terms maintained a modest rise. It was supported by improvement in construction and manufacturing compared with the growths in the previous quarter. Also, retail and food hospitality sector saw improvement.

Contribution to Real GDP Growth by Major Production Sectors

＜Contribution to Real GDP Growth by Production Activity＞ Recent quarterly

GDP picked up due to improvement of construction and manufacturing



-15

-10

-5

0

5

10

15

20

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Private consumption Government consumption Construction investment

Plant and equipment investment Export of goods and service Import of goods and service

Adjusted others GDP

(YoY, %) (at chained 2010 year prices, original series)

(Note) 1. Preliminary data was used from 1Q14-3Q15 and advanced estimate data was used for 4Q152. Others include intangible fixed asset investment, other gross capital formation and statistical discrepancy3. Due to the change of System of National Accounts, restated GDP figures were used

(Source) BOK

5

＜Contribution to Real GDP Growth by Expenditure Activity＞ Recent quarterly

GDP growth was supported by construction investment and private consumption

�Regarding expenditure, private consumption accounted for 47.2% of total real GDP in 4Q15 followed by construction investment (14.8%), government consumption (14.4%), and plant & equipment investment (9.4%). Besides, net export shared 6.2% of total real GDP as export accounted for 55.8%, while import accounted for 49.6%.

� In 4Q15, rising trend in YoY terms was due to further growths in private consumption and construction investment. Export grew in real term largely owing to appreciation of USD.

Contribution to Real GDP Growth by Expenditure Activity



2. Korean Economic Indicator and Outlook


(YoY, %)

Destination 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

China 24.4 12.2 18.0 11.5 -5.1 34.8 14.8 0.1 8.6 -0.4 -5.6

US -3.5 4.5 6.0 1.3 -18.8 32.3 12.8 4.1 6.0 13.3 -0.6

ASEAN-5 9.1 12.8 17.7 23.7 -17.8 39.1 32.8 10.1 7.5 1.4 -1.5

EU 15.4 11.0 13.4 6.3 -20.2 14.8 4.1 -11.4 -1.0 5.7 -6.9

Japan 10.7 10.4 -0.6 7.1 -22.9 29.4 40.8 -2.2 -10.7 -7.2 -20.5

Total 12.0 14.4 14.1 13.6 -13.9 28.3 19.0 -1.3 2.1 2.3 -8.0

(Note) ASEAN-5: Indonesia, Malaysia, Philippines, Thailand, and Vietnam(Source) CEIC

40

60

80

100

120

140

160

400

600

800

1,000

1,200

1,400

1,600

05 06 07 08 09 10 11 12 13 14 15 16

(Source) Bloomberg

(KRW/USD) (JPY/USD)

JPY/USD(RHS)

KRW/USD

7

＜Export Condition＞ Export value declined as export unit price dropped

affected by low oil price and softened China demand

�Korea’s total export in nominal terms declined by -8.0% YoY to USD 526,757 million in 2015.

� By product, semiconductor

accounted for 11.9% of total export

followed by general machinery

(8.9%), automobile (8.7%), shipyard

(7.6%), petrochemical (7.2%) and

petroleum (6.1%).

� By destination, export to China

accounted for 26.0% of total export

followed by US (13.3%), ASEAN-5

(11.0%), EU (9.1%) and Japan

(4.9%).

� In 2015, while export volume still grew albeit a slower pace, export value faltered due to decline in export unit price dragged by drop in oil price. Under the circumstances, export value to major destinations posted negative growths. Particularly, further slow growth in China economy has led to a weak export. Export to US edged down due to weak demand in certain products such as steel products. Exports to EU and Japan were further pressured by depreciation of their local currencies.

Export Growth by Major Destinations (Value in USD base)

Total Export and Growth Rate Fx Rate (KRW/USD and JPY/USD)


-60

-40

-20

0

20

40

60

0

10,000

20,000

30,000

40,000

50,000

60,000

05 06 07 08 09 10 11 12 13 14 15

Export ($) YoY (RHS)

(USD million) (%)

(Source) CEIC


＜Unemployment Rate and CPI＞ Unemployment rate remained low. Annual

CPI inflation was record low

�Unemployment rate remained low during 4Q15. Annually, average rate in 2015 slightly went up along with economic slowdown.

�Unemployment rate may keep steady level, although it may rise in a very near term due to seasonal factor. Anticipated stable economic growth would uphold steady employment. Meantime, youth unemployment rate is likely to remain high.

�CPI inflation slightly rose during 4Q15. However, annual CPI was record low in 2015 mainly due to crash in oil price, while core CPI inflation edged up annually.

�CPI inflation may rise. Demand side might improve slightly supported by possible economic improvement. Meantime, the adverse impact by the earlier steep fall in oil price may start to diminish from the second half of this year. Thus, CPI inflation would see rather modest increase.

Unemployment Rate and CPI Inflation


0

1

2

3

4

5

6

7

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

(%)

Unemployment rate

CPI inflation(YoY) Core CPI inflation

(YoY)

(Note) Core CPI excludes oil and agricultural products(Source) Korean Statistical Information Service ("KOSIS")


＜KOSPI Index＞ Index declined under the weak investment sentiments due to

rising uncertainties in global and domestic economic growths

� The total market capitalization posted KRW 1,207 trillion as of end Jan 2016 from KRW 431 trillion in early-2005.

�Over the recent past months, KOSPI index continued to decline below 2000 level. Investment sentiments were discouraged by concern over economic slowdown under rising uncertainty in global conditions due to further moderating China’s economy, implementation of interest rate rise by US Fed and consistent low oil price.

KOSPI Index Trend


0

500

1,000

1,500

2,000

2,500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

(Source) Korea Stock Exchange

(Jan 1980=100)


20

40

60

80

100

120

140

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

CSI

(Note) 1. BSI: Business Sentiment Index / CSI: Consumer Sentiment Index2. BSI, CSI: above 100 means number of positive responses exceeds number of negative responses; below 100 meansnumber of positive responses is less than number of negative responses

(Source) BOK

BSI (Manufacturing)

BSI (Industry total)

10

＜Sentiment and Economic Composite Indices＞ Sentiments softened recently.

Leading indices indicated modest economic expansion in the near term

�Business Sentiment Index (“BSI”) and Consumer Sentiment Index (“CSI”) declined recently after some recovery from MERS impact.

�Sentiments softened due to lack of strong catalyst in export and domestic growths.

� For leading indicators, LCI and CLI saw mild up-trends in 4Q15. Given that, Korea economy is expected to expand modestly in the near term.

Sentiment Index

Economic Composite Index

(Note) 1. LCI, CCI indices: Average 2010=1002. CLI (RHS) Index: above 100 and increasing indicates expansion; above 100 and decreasing indicates downturn; below 100 and decreasing indicates slowdown; below 100 and increasing indicates recovery

(Source) KOSIS, OECD


96

98

100

102

104

60

80

100

120

140

160

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

KOSIS's CCI (Coincident Composite Index)

KOSIS's LCI (Leading Composite Index)

OECD's CLI (Composite Leading Index)


(YoY, %)

2016 2017 2016 2017 2016 2017

World 3.1 3.2 3.4 3.4 3.6 3.0 3.3

Korea 2.7 3.0 3.2 3.2 3.6 3.1 3.6

China 6.9 6.6 6.4 6.3 6.0 6.5 6.2

US 2.5 2.4 2.3 2.6 2.6 2.0 2.2

Euro area 1.5 1.7 1.8 1.7 1.7 1.4 1.7

Japan 0.6 1.0 0.7 1.0 0.3 0.8 0.6

2015eBOK (as of Jan-16) IMF (as of Jan-16) OECD (as of Feb-16)

(Note) 1. Data for Euro area, BOK and IMF cover 17 countries and OECD covers 15 countries2. Data for Korea by IMF and OECD was based on the forecasted figures as of Oct-15 and as ofNov -15 respectively

(Source) BOK, IMF, OECD

11

＜Outlook of Korea Economy＞ Korea GDP may slightly improve supported by

export benefiting from appreciated USD and steady domestic demand�Korea real GDP is projected to improve marginally in 2016-17.

�Export growth in real terms is likely to improve slightly partially due to appreciation of USD. However, further slowdown in China economy may especially weigh on Korea’s export.

�Domestic demandmight be largely steady.

�Private spending may rise softly along

with a modest economic growth. Growth

would be limited due to high household

debt amid rising economic uncertainties.

However, purchasing power might be

sustained by low unemployment rate and

still low interest rate.

�Construction investment may decelerate

from the high base. While softening

sentiments could restrain the growth, it

may continue to grow supported by

previous favorable orderings.

Real GDP Growth Forecast



3． Trends of Major Industry in Korea


0

20

40

60

80

05 06 07 08 09 10 11 12 13 14 15

Semiconductor

Flat panel display

Handset (incl. handset parts)

(USD billion)

(Note) 1. Due to the statistics reclassification, handset data from 2012 includes handset parts

2. Flat panel display was restated from 2010 due to inclusionof additional items

(Source) IITP, NIPA, KEA, KAIT

-10

0

10

20

30

40

50

0

100

200

300

400

2010 2011 2012 2013 2014 2015

China (incl. Hong Kong) ASEAN

Europe US

Central & South America Japan

YoY

(USD billion)

(Export to major areas) (RHS)

(YoY, %)

-10

0

10

20

30

40

0

100

200

300

400

500

05 06 07 08 09 10 11 12 13 14

Export Domestic

YoY (Production) (RHS) YoY (Export) (RHS)

(KRW trillion) (YoY, %)

0

2

4

6

8

0

1

2

3

4

11 12 13 14 15

DRAM (2GB) NAND (RHS)

(USD) (USD)

(Source) Bloomberg

13

＜Electronics＞ Industry may stay largely flat due to overall soft demand on

electronics devices �Electronics industry production slightly declined YoY in Jan-Nov 2015. Production softened as export slowed down to a flat growth and domestic demand was tepid.

�Export growths to developing countries in Asia (i.e. China and ASEAN) were offset by export decline in other markets.

� Looking forward, electronics industry may remain largely flat. Apart from high base, semiconductor growth may relatively ease affected by continuous weak demand from PC and low DRAM price. However, steady demand from mobile device and increasing memory contents per device might support the sector. Handset may maintain to grow but at modest paces under the influence of slowdown in smartphone demand.

Electronics Industry Production Export by Major Destinations

Export by Major Products DRAM and NAND Price Trend

(Note) 1. Production: The sum of ICT devices and software2. Export: Export value out of domestic production,

Domestic: Domestic sales out of domestic production 3. Annual average FX rate was used for export

(Source) KAIT, KEA, IITP

(Note) 1. Due to new classification of statistics, the data from 2012 wasrestated

2. ASEAN: Mainly Singapore, Thailand, Indonesia and Malaysia(Source) NIPA

3. Trends of Major Industry in Korea

Jan-Nov14

Jan-Nov15


-60-40-20020406080100120140

050100150200250300350400450500

07 08 09 10 11 12 13 14 15

Commercial Vehicle (CV) Production: 0.42 mil ('15)

Passenger Vehicle (PV) Production: 4.14 mil ('15)

YoY Growth (CV Production): 5.0% ('15) (RHS)

YoY Growth (PV Production): 0.3% ('15) (RHS)

(1,000 units) (YoY, %)

(Source) CEIC

-10

0

10

20

30

0

2,000

4,000

6,000

8,000

10,000

05 06 07 08 09 10 11 12 13 14 15

Sales by Hyundai and Kia Motors YoY (RHS)

(Note) Sales units were based on the shipment(Source) Hyundai Motor, Kia Motors, News articles

(1,000 units) (YoY, %)

(Source) KAMA

-40

-20

0

20

40

60

80

100

0

10

20

30

40

50

60

70

07 08 09 10 11 12 13 14 15

US Middle East

EU Other Europe

Central & S America Asia

Others YoY (Total)

(USD billion) (YoY, %)

(1,000 units)

(YoY, % ) (YoY, % ) (YoY, % ) (YoY, % )

2005 3,699 6.6 1,143 4.5 2,586 8.7 743 78.7

2006 3,840 3.8 1,164 1.9 2,648 2.4 1,010 35.9

2007 4,086 6.4 1,219 4.7 2,847 7.5 1,162 15.1

2008 3,827 -6.4 1,154 -5.3 2,684 -5.7 1,457 25.4

2009 3,513 -8.2 1,394 20.7 2,149 -19.9 1,902 30.5

2010 4,272 21.6 1,465 5.1 2,772 29.0 2,605 37.0

2011 4,657 9.0 1,475 0.6 3,152 13.7 3,141 20.6

2012 4,562 -2.0 1,411 -4.3 3,171 0.6 3,635 15.8

2013 4,521 -0.9 1,383 -1.9 3,089 -2.6 4,108 13.0

2014 4,525 0.1 1,464 5.8 3,063 -0.8 4,414 7.4

2015 4,556 0.7 1,589 8.6 2,974 -2.9 4,412 -0.1

Domestic Domestic Export

production sales sales production

Overseas

(Note ) Domestic sales: Units sold by Korean car makers(Source) KAMA

14

＜Automobile＞ Production may maintain to grow marginally as domestic sales

is likely to be sustained and export might recover slightly

�Automobile production in Korea grew slightly by 0.7% YoY to 4.56 million units in 2015.

�Domestic sales rose favourably stimulated by ongoing consumption tax cut and new models. Multipurpose vehicle continued to attract demand (i.e SUV sales: 33.9% YoY) and supported sales growth.

�Export remained challenged. Although export to one of major markets US rose by 18.1% YoY, export to other markets were sluggish due to their weak demand or weakened their local currencies.

� Looking forward, domestic production may maintain to grow slightly.

�Domestic sales is expected to rise

marginally. Sales might be positive during

the first half supported by extended

consumption tax cut period (i.e. Feb-Jun),

while it would decline in the latter half.

�Export is expected to slightly recover in

view of mild improvement of global

automobile demand. Increase in overseas

production capacity would restrain export

growth. However, tariff cuts under FTA

(i.e. US, Canada, EU and Australia) may

support export to turn positive to a certain

extent.

Domestic Production by Vehicle Type

Export by Major Destinations

Production and Sales

Global Sales by Hyundai-Kia



-30

-20

-10

0

10

20

30

40

0

10

20

30

40

50

60

05 06 07 08 09 10 11 12 13 14 15

Export of petrochemical products YoY (RHS)

(Source) MOTIE, MKE

(USD billion) (YoY, %)

-30-20-1001020304050

0100200300400500600700800

07 08 09 10 11 12 13 14 15

Ethylene Production: 8.27 mil ('15)

YoY Growth: -0.2% ('15) (RHS)

(1,000 tons) (YoY, %)

(Source) CEIC

0

10,000

20,000

30,000

40,000

50,000

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

05 06 07 08 09 10 11 12 13 14 15

Olefins BTX

Intermediaries Synthetic resins

Synthetic fibers raw materials Synthetic rubbers

Export (RHS)

(1,000 tons) (1,000 tons)

(Source) KPIA

0

400

800

1,200

1,600

2,000

0

30

60

90

120

150

05 06 07 08 09 10 11 12 13 14 15

Brent crude oil Naphtha (RHS)

Ethylene fob Korea (RHS)

(Source) Bloomberg

(USD/bbl) (USD/MT)

15

＜Petrochemical＞ Industry might stay steady with marginal growth potential

due to slight improvement in domestic demand and steady export�Ethylene production remained largely flat in year-on-year term at 8.27 million tons in 2015 although there were more maintenance works compared with a year earlier. Production of major petrochemsectors grew modestly due to capacity expansion in intermediaries.

�Amid mostly flat demand sales, export volume of major petrochem sectors rose supported by increased capacity. While, export value plunged as export unit price dropped due to persistent low oil price.

� Looking forward, ethylene production as well as overall production of major petrochem sectors may remain steady with marginal rise possibility.

�Domestic demand may stay soft with a

marginal growth potential along with

modest economic growth.

�Export demand is likely to remain mostly

flat. Slowdown in China economy would be

unfavorable, but demand from other Asia

countries (i.e. India and Vietnam) may

grow further.

�Cost competitiveness of naphtha cracking products by Korea would be maintained to compete against low cost coal or gas based products as oil price is projected to stay low. Meantime, ethylene margin spread may remain steady due to relatively stable supply and demand balance.

Ethylene ProductionProduction & Export of Major PetrochemSectors

Export of Petrochemical Products Raw Materials and Ethylene Price Trend



-40

-20

0

20

40

0

20,000

40,000

60,000

80,000

2004 05 06 07 08 09 10 11 12 13 14 15e

Production

Apparent consumption

YoY Growth (Production) (RHS)

YoY Growth (Apparent consumption) (RHS)

(1,000 tons) (YoY, %)

(Source) KOSA

-30

-20

-10

0

10

20

30

40

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

05 06 07 08 09 10 11 12 13 14 15

x 0.1

Crude Steel Production: 69.67 mil ('15)

YoY Growth: -2.6% ('15) (RHS)

(1,000 tons) (YoY, %)

(Source) CEIC

0

50

100

150

200

250

300

0

200

400

600

800

1,000

1,200

09 10 11 12 13 14 15

Iron ore (RHS)

Steel price(World)

(USD/MT) (USD/MT)

(Source) Bloomberg

16

＜Steel＞ Industry may stay weak due to continuous soft domestic demand

and weak export given tepid world steel demand outlook in supply glut

�Crude steel production fell by -2.6%YoY in 2015 due to weak demand.

�Domestic sales for major products were subdued. While demand from construction industry increased, other major downstream industries remained lackluster.

�Export in value declined significantly due to tepid demand as well as overall price drop. Especially, demand on steel pipes for oil and gas from US fell sharply largely due to deterred development activities in low oil price environment.

� Looking forward, steel industry may remain weak as demands are unlikely to recover significantly and oversupply condition might persist.

�Domestic demand would be soft as

there is lack of strong sign of

improvement in major downstream

demands.

�Export is expected to be weak given

tepid world steel demand outlook. In

particular, China is expected to see

another negative growth in steel

consumption. Thus, export would be

more focused on developed economies

in western markets.

Crude Steel Production

Raw Material & Steel Price Index Trend

Production and Consumption of Steel Products

Export of Steel Products by Major Destinations


0

2,000

4,000

6,000

8,000

0

10,000

20,000

30,000

40,000

05 06 07 08 09 10 11 12 13 14 15

Total export Japan (RHS)

China (RHS) US (RHS)

ASEAN-10 (RHS) EU-27 (RHS)

(USD million) (USD million)

(Source) KOSA


-100

0

100

200

300

400

0

200

400

600

800

1,000

10 11 12 13 14 15

x 0.1

Bulk Carrier Completion: 0.65 mil ('15)

YoY (Bulk Carrier): 18.2% ('15) (RHS)

(1,000 tons) (YoY, %)

-150

0

150

300

450

600

0

200

400

600

800

1,000

10 11 12 13 14 15

x 0.1

Oil Tanker Completion: 0.95 mil ('15)

YoY (Oil tanker): 146.7% ('15) (RHS)

(1,000 tons) (YoY, %)

-100

0

100

200

300

400

0

200

400

600

800

1,000

10 11 12 13 14 15

x 0.1

Container Ship Completion: 2.94 mil ('15)

YoY (Container Ship): -22.2% ('15) (RHS)

(1,000 tons) (YoY, %)

-100

0

100

200

300

400

0

200

400

600

800

1,000

10 11 12 13 14 15

x 0.1

LPG/LNG & General Cargo Carrier Completion: 6.60 mil ('15)

YoY (LPG/LNG & General Cargo Carrier): 6.9% ('15) (RHS)

(1,000 tons) (YoY, %)

17

＜Shipbuilding＞ Industry may remain weak condition due to sluggish demand

and overall overcapacity

Ship Completion


�New ship completion increased by 6.8% YoY to 11.15 million tons in 2015 due to previous orderbookgrowths.

� LPG/LNG carrier completion maintained to rise, but container declined. Oil tanker increased sharply as demand has been improved in response to increase in oil production. Bulker rose largely due to low base.

� For new contracting and orderbook by Korea, both declined YoY in 2015.

� Looking forward, shipbuilding industry would remain subdued owing to weak demand and overcapacity.

�LPG/LNG carrier may attract certain

demand, but its new orders would

continue to soften after the substantial

orders earlier.

�Container might be tepid due to

structural overcapacity.

�Tanker could continue to receive

certain level of new orders supported

by storage demand.

�Bulker might remain sluggish amid

soft demand in commodity and

overcapacity.

ContainerLPG/LNG & General Carrier

Bulk CarrierOil Tanker

(Source) CEIC

(Million tons, %)

2010 2011 2012 2013 2014 2015

Total Completion 12.54 14.21 12.38 11.04 10.44 11.15

YoY N.A. 13.3 -12.9 -10.8 -5.4 6.8


-5

0

5

10

15

20

25

30

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

07 08 09 10 11 12 13 14 15

Retail Sales: 367 tr ('15)

YoY Growth: 1.9% ('15) (RHS)

(KRW billion) (YoY, %)

(Source) CEIC

-10

0

10

20

30

40

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Large Discount Store Not-in-store Supermarket

Department Store Convenience Store

(Source) CEIC

(YoY, %)

50

60

70

80

90

100

110

120

130

140

150

1Q05

1Q06

1Q07

1Q08

1Q09

1Q10

1Q11

1Q12

1Q13

1Q14

1Q15

1Q16

1Q16:96

18

＜Retail＞ Retail sales may increase modestly in line with mild improvement of

private spending

�Retail sales rose by 1.9% YoY to KRW 367 trillion in 2015 supported by stimulus grand promotions led by government.

�By sector, despite unexpected MERS outbreak, most sectors registered positive sales growths in 2015. Although department store continued to decline, the pace decelerated owing to more aggressive promotions. Not-in-store maintained higher growth. Convenience store’s growth was largely owing to cigarette tax rise.

� Looking forward, retail sales may continue to grow. Although soft consumer and retailer sentiments reflect that consumer may adopt relatively cautious stance on spending, retail sales may increase modestly in view of mild improvement in private spending.

Retail Sales and Growth Trend Retail Business Survey Index (“RBSI”)

Growth Rate by Major Sectors


(Note) RBSI refers to the retailer sentiment index for the upcomingperiod though the survey. Index above 100 means greater numbers of retailers expect improvement

(Source) Korea Chamber of Commerce & Industry


4. Conclusion


Outlook of Korea Economy and Major Industry

� Korea economy is projected to improve slightly in 2016. Despite growing, economy may continue to remain under the soft

condition due to tight export environment and largely steady domestic demand.

� Export in real terms might be able to expect some marginal growths benefiting from appreciated USD effect. Demand

improvement from some developed economies and FTAs could support export to a certain extent. Nevertheless, overall

environment may continue to be fragile. Possible further slowdown in China economy would especially weigh on Korea’s export.

� Domestic demand is likely to be steady. Private spending may rise modestly. Growth might be limited by high household debt

under rising economic uncertainties. However, purchasing power would be sustained by low unemployment rate and still low

interest rate. Plant & equipment investment may continue to rise albeit at a slower pace. Despite overall cautious atmospheres

due to growth uncertainties, stimulus policies may support positive growth. Construction investment might decelerate from the

high base. While softening construction sentiments could restrain the growth, it would remain positive from previous favorable

orderings.

� Regarding major industry, due to vulnerable export conditions, most major manufacturing industries are unlikely to see

significant improvements. Electronics may remain soft and stay largely flat due to tepid demand. Automobile is expected to grow

marginally due to positive domestic sales and export supported by extended consumption tax cut period and FTAs.

Petrochemical production may remain largely steady with possible soft rise due to modest economic growth. Steel would stay

weak owing to tepid domestic demand and weak export under lackluster demand and supply glut in global. Shipbuilding would

continue to be subdued. Retail sales may rise modestly in line with mild growth of private spending.

4. Conclusion


This report is intended only for information purposes and is not intended to constitute an offer or solicitation to buy or sell securities or any other products. Contents of the report are information as at publish date and are subject to change without notice. This report has not been prepared to provide legal, taxational, financial, market-judgmental, or any other advises on propriety of any transactions. In taking any action, each reader is requested to act on the basis of his or her own judgment upon consulting certified lawyers, accountants or other professionals regarding the accuracy, validity and reliability of information appeared in this report.Bank of Tokyo-Mitsubishi UFJ is regulated by the Financial Services Authority.No part of this publication may be reproduced, stored in a retrieval system or transmitted without the prior written permission of The Bank of Tokyo-Mitsubishi UFJ Limited.

Copyright © 2016 The Bank of Tokyo-Mitsubishi UFJ, Ltd. All rights reserved.

Partner/client name/logo here(edit on Master)


The Bank of Tokyo-Mitsubishi UFJ, Ltd.

Corporate Research Division (Hong Kong)

6/F., AIA Central, 1 Connaught Road Central, Hong Kong

[Contact] Jessica H.K. KIM ([email protected])

Documents

HKIR2015-58 Korea Economy and Industry Overview 4Q15 · 2. Due to the change of System of National Accounts, GDP figures were restated from 2000 (Source) Bank of Korea ("BOK") 3 ＜GDP